I am fascinated by the massive growth in mobile phone penetration globally. This must be one of the biggest social changes that humans were ever submitted to. I am sure that this social phenomena, will eventually impact the way that we trade and pay as well. This is what I am writing about. See disclaimer at the bottom of blog.

Saturday, June 09, 2007

Prepaid cards are being utilised for many applications today. These range from giftcards to low cost banking applications. Applications for payrolls and cheap alternatives for cash distribution have been rolled out many times. All of these applications are based on plastic cards. The use of magnetic stripe solutions are by far more popular than any other solution.

However the technology is available today to deploy prepaid card products by making use of mobile phones. This means that no plastic is produced and any communication, redemption and payment is dealt with by mobile phones. The use of mobile phones as the means to "virtual" prepaid cards can lead to a lot of benefits:

Prepaid cards can be distributed much more easily and cost effectively (e.g. by making use of SMS's)

Prepaid cards can be distributed and activated with much mre security features

Additional payment functionality can be made available that was never possible before, and

Information related to the use of pre-paid cards can now be gathered more easily and acted on

Friday, June 08, 2007

"A group of Europe's largest banks are holding secret discussions to establish a pan-European debit card scheme that would challenge those operated by MasterCard and Visa" (Read the article on the 11th May 2007)

and

"India's banks are considering setting up a domestic card payment settlement system to rival the networks operated by Visa and MasterCard" (article)

Why would banks want to do this? Surely, as the only shareholders in MasterCard and Visa they benefit primarily because one standard exists and that allows them to transact with each other in many different countries and with as many currencies - totally seamlessly. Just doesn't make sense. I can think of only two reasons why this should even be considered:

The first is the cost associated with a transaction as it is passed through the Credit Card settlement network. This is a function of the number of parties that must benefit from the transaction as well as some of the complexities regarding dispute resolution and fraud management. However, I am sure that if the different parties put their mind to it and make some compromises this should never be a problem.

The other reason can be because the organisations behind credit card transactions have started to morph into companies that are starting to compete with the banks. They may even be perceived as potential competitors and threats. In the Lafferty article the following words are being used: "....they do not have to rely upon foreign states or organisations for the provision of critical infrastructure services, including payments." (foreign organisations?)

It is a fact that credit card organisations do not play a neutral role in facilitating mobile payments. (One more than the other). These organisations are often prescriptive on designs and architecture and sometimes even develop competing product to what banks should be doing. It could be worthwhile to define the ideal role of credit card organisations in the world of mobile payments.

Saturday, June 02, 2007

Since I was a small boy, Barclays bank epitomise banking. Other banks may try to do banking, but Barclays has always been the pinnacle of banking to me. When credit cards were launched, Barclays called their credit card a Barclaycard and this brand attached itself to credit cards. One could say that Barclays did to credit cards what Hoover did to vacuum cleaners.

So when Barclays announced the availability of their mobile banking solution in the United Kingdom last month, everyone should take notice. Barclays would not launch a product and attach the word "banking" to it, if this is just another fad. I think we can now safely say that mobile banking has moved from the maverick fringe to an enterprise necessity.

Suppliers of mobile banking solutions should also take note of this. The time for experimental pilots is gone. The need for mature, proven products that can be guaranteed by the supplier has now arrived. Only suppliers that are able to provide acceptable levels of support conforming to agreed service levels will be able to compete in this market going forward.

This is a picture of an ATM with a card skimming device installed in front of the existing card slot. Very difficult to spot, not so? Recently, Westpac announced that they blocked 900 card accounts of cards that were used at a ATM in Melbourne that was tampered with and where the card information was skimmed. (Read article). All of the cards that could be effected were blocked, but fraudulent transactions were only conducted on 75 cards. The total amount of the fraud amounted to $ 100 000. Westpac also announced in the same press release that they are in the process of installing anti-skimming devices on their ATM's. It has been reported that these devices actually vibrate the card as it is being pushed into the slot, making it impossible to be read by a static device. Three things spring to mind when reading this story:

Westpac must be congratulated that they actually tell this story. I often hear banks saying that it would break confidence in the banking industry if cases of fraud were to be reported. I believe that this attitude aggravates the problem. By telling people what can possibly happen, they can be more prepared to fight the fraud and report any suspicious things.

Second thing, it does spring to mind that Westpac may be publishing the story to highlight the fact that they might be the only bank in Australia that is installing the vibrating card trick. I was wondering what the cost of this change to all the ATM's is and if this is an indication of the size of skimming fraud in Australia. If this project is being executed with a positive business case, many other skimming incidents must have occurred to make it worth the cost and effort.

So is this vibrating card reader the only anti-skimming and anti-fraud mechanism that can be deployed for card fraud, and a related question: Why talk about this on a mobile banking blog?

Fundamosuccessfully deployed a number of very powerful anti-fraud mechanisms for card systems by making use of the unique characteristics of mobile phones. Solutions provided by Fundamo to combat card-related fraud include transaction alert services delivered to the card-holder's phone, ability to change a card PIN on a phone, or even block the card and mechanisms where the mobile phone is utilised as "something you have" in two factor authentication for transactions performed on the Internet... In addition, most phones can vibrate too (for free).

Friday, June 01, 2007

It is a sign of our times that we don't have time to do anything anymore. Looking back at the end of a week to take stock of what has been achieved, one often feel as if nothing has been achieved. At a previous job that I had at a big corporate, I asked a senior manager what his typical day looks like. The manager replied that he basically just goes to meetings every day. I then asked him why does he go to these meetings, what is the objective and what does he achieve by attending meetings. To this he replied, quite seriously: "I go to meetings to find out what is going on".

At least we now have blogs that we can read "to find out what is going on."

I notice that I have not posted anything since 22 May. The reason for this is that we concluded some very interesting agreement at Fundamo during the past two weeks and I was quite busy with the activities related to these agreements. We will be making a media release on some of these deals next week, so I don't want to use my blog to "jump the gun". I intend to start posting in earnest many thoughts that I would like to share and get comments on. Some of the topics that I would like to discuss in the next few days are:

New types of fraud in banking now, and how we can use mobile banking help to fight these.

Some advances in mobile banking in specific markets (e.g. the UK and the US)

Some ideas on applying mobile banking in money transfer

Thoughts on least cost routing of payment clearing

The pre-paid card market and opportunities in this market

And some of the interesting "competition" that are emerging for Mastercard and Visa and the chances of them succeeding

See I am already tired just thinking of what I would like to post, but at least I have committed myself now.

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This is my personal blog. It is not my intention to distribute news that is available elsewhere, but rather comment on it or provide the reader with my own thoughts. Unless otherwise stated, the views expressed on this blog are mine alone. I expressly disclaim any and all liability of any kind or nature with respect to any act or omission based wholly or in part in reliance on anything contained on this blog. Any links that appear on this blog are purely for your information. I'm not making any representations as to their content or, in fact, any other matter concerning them. Follow all links at your own risk.